Overview of recent cases before the Court of Justice of the European Union (September-December 2023)

Abstract

This case report discusses six judgments of the Court of Justice of the EU rendered between September and 19 December 2023. The first judgment reported is in case C-422/22 Zaklad v TE, in which the Court took the opportunity to clarify that the duty for the issuing institution to verify that the conditions for issuing an A1 (posting) certificate are met arises not only at the moment of the issuance but also continuously during the posting period. The case report also covers the case C-45/22 HK v Service fédéral des Pensions, in which the Court interpreted for the first time Article 55(1) (a) of Regulation 883/2004 on the method of calculation for overlapping benefits of a different kind. The case report ends with two rulings dealing with infringement procedures against the Netherlands: C-459/22 and C-360/22 European Commission v Kingdom of The Netherlands. In these judgments, the Court considered that the Dutch tax rules on transfer of pension capital were an infringement of the free movement of workers (Article 45 TFEU). Finally, we report on two cases on social security benefits for EU officials and two cases dealing with Covid-19 measures.

Introduction

In the last three months of 2023, the CJEU rendered several judgments with relevance for the field of social security law. In this case report, we will discuss four judgments in detail and report briefly on four other judgments. Firstly, in C-422/22 Zaklad v TE, ¹ the Court was asked whether the dialogue and conciliation procedure was applicable in the event of unilateral withdrawal of an A1 certificate by the issuing institution. The Court answered negatively but added that there is a duty for the issuing institution to continuously check whether the conditions for posting are fulfilled.

Secondly, the Court rendered its judgment in C-45/22 HK v Service fédéral des Pensions ² on the method of calculation in cases of overlapping benefits of a different kind. This case was the first time the Court had the opportunity to interpret Article 55(1)(a) of Regulation 883/2004. The Court found that the method of calculation is not defined by Article 55(1), so it is up to the Member State who pays the benefit to determine a method. The only limit to the Member State's assessment is that the method for calculation should not be particularly unfavourable for the workers who have exercised their right to free movement.

Thirdly, our case report discusses two judgments rendered on 16 November 2023 – in cases C-459/22 ³ and C-360/22 ⁴ – concerned with infringement procedures against the Netherlands. These judgments concern Dutch tax rules applicable if a worker decides to transfer their pension capital to a pension insurance provider established in another Member State. Under the Dutch rules, such a transfer of pension capital is tax-exempted only if the other insurance provider or the worker can provide a guarantee (C-459/22) and if the lump-sum payment option of the capital is subject to less generous conditions than in the Netherlands (C-360/22). According to the Court, these rules infringe Article 45 TFEU on the free movement of workers.

Finally, a few judgments are briefly reported on. Case C-206/22 TF v Sparkasse Südpfalz ⁵ is concerned with the question of whether paid annual leave should be carried over if the leave coincides with quarantine measures in the context of the Covid-19 pandemic. C-415/22 JD v Acerta ⁶ and C-173/22 P MG v EIB ⁷ both deal with questions related to the social security situation of EU officials.

Administrative cooperation and duties following the unilateral withdrawal of an A1 (posting) certificate: Case C-422/22 Zakład Ubezpieczeń Społecznych Oddział w Toruniu v TE

The judgment of the Court of Justice in Zakład Ubezpieczeń Społecznych Oddział w Toruniu v TE clarified the scope of the dialogue and conciliation procedure in the context of unilateral withdrawal of A1 (posting) certificates (officially Portable Document A1/ formerly the E 101 certificate) by the issuing institution, as well as any duties following that withdrawal. Interestingly enough, the Court also clarified the scope of the monitoring and verification duties of the issuing institution throughout the duration of the posting, despite this not being the subject of the preliminary questions raised by the Polish Supreme Court.

TE was a self-employed person registered and paying taxes in Poland. He then entered into a contract with a Polish firm to perform the duties of a ‘second site manager’ in France for a certain duration. The competent Polish institution issued him with an A1 certificate, confirming that he was covered by Polish social security legislation, pursuant to Article 13(2)(b) of Regulation 883/2004. ⁸ Following a reconsideration of its own action, the competent Polish institution decided to withdraw the A1 certificate, since it took the view that TE was pursuing a working activity only in France ⁹ and thus was not a posted worker. It withdrew the certificate without entering into a dialogue and conciliation procedure with the corresponding French institution.

The Court confirmed that the Polish competent institution was correct in not following the dialogue and conciliation procedure envisaged in Article 5 of Regulation 987/2009. ¹⁰ Essentially reciting the guidance issued by the Administrative Commission, ¹¹ the Court clarified that the procedure was only to be followed in the event of a dispute as to the validity and accuracy of the facts of the certificate or when the involved authorities disagree on the applicable legislation (paragraph 43). The procedure is a conflict-solving one, but in the present case there was no conflict between the institutions of the involved Member States (paragraph 42). However, the Court found that following the (unilateral) withdrawal, the institution in question shall inform the individual and the other involved institution(s) of other Member States of the withdrawal, so that the worker can exercise his rights ‘as quickly as possible and under optimum conditions’ to determine the social security legislation applicable to his situation (paragraphs 49, 53 and 55).

Without being asked on the matter, interestingly enough, the Court additionally found that the principles of sincere cooperation and mutual trust ‘imply an obligation on the issuing institution to verify throughout’ the duration of the posting, whether the certificate complies with the rules on determination of applicable legislation, ‘having regard to the actual situation of the worker concerned’ (paragraph 36). The conclusion is logical, albeit a novel one.

The Court had already held that A1 certificates are binding on the institutions of the Member State of destination (to which a worker is posted). ¹² The binding effect of the A1 certificate is based upon the presumption that the certificate is accurate. ¹³ To that end, the Court of Justice has already ruled that the issuing Member State has to ‘carry out a proper assessment of the facts relevant for the application of the rules’ on applicable legislation and to ensure that the information is correct when issuing A1 certificates. ¹⁴ However, as Rennuy mentions, the need for such an assessment merely begins in the phase of the issuance of the certificate and is necessary afterwards as well, throughout the posting period. ¹⁵ Yet, the duties following the issuance of the certificate were never fully expressed in case law, until this judgement.

Prior to this judgment, issuing institutions were (still) under an obligation to withdraw A1 certificates whose information was incorrect or when the determination of the applicable legislation was not in compliance with Title II of Regulation 883/2004, following a request from the institutions of another Member State. ¹⁶ However, this judgement ensures that issuing institutions have a duty to continuously verify the validity of A1 certificates unilaterally, independently of any requests originating from authorities of other Member States.

As a result, issuing institutions are under quite burdensome duties, since the verification has to happen during the entire posting period, and not just at the point of issuance of the A1 certificate. Despite the burden it places on issuing institutions, the solution was the only one which could ensure consistency with the previous case law. It has already been held that the institutions of Member States of destination, which also includes the national courts of the Member State of destination, ¹⁷ have no power to ‘scrutinise the validity’ of A1 certificates, for the purpose of ensuring that workers remain covered by a single social security legislation. ¹⁸ Since the Member State of destination is prohibited from carrying out such a review (save for serious instances of fraud), ¹⁹ it is reasonable that it shall be the issuing Member State which reviews whether the certificate complies with the requirements set by EU law, throughout the posting period. ²⁰

Although it seems as if the Court is genuinely attempting to address potential gaps in the legal and judicial framework of compliance of posting certificates with the requirements under EU law, practice in Member States reveals a more sombre reality. ²¹ The (already) deficient or inexistent assessments conducted by Member States at the point of issuing the certificates do not engender a positive reassurance that these will be corrected unilaterally at a latter point in the posting period. The main issue, which is the lack of incentives or resources for the Member State of issue to properly conduct assessments of posting certificates, ²² remains unresolved. In fact, with the requirement to continuously assess the conditions of posting, the resources of Member States of origin may be stretched even further. Furthermore, should the Member State of origin conduct these assessments properly at any point during the posting period, the result might be that the posting conditions are not met. Hence, the A1 certificate has to be withdrawn and the social security legislation of that State is no longer applicable. ²³ That State would stop receiving social security contributions. The Member State of origin would therefore effectively dedicate its resources to checking and monitoring A1 certificate posting conditions, to the ultimate detriment of its own financial resources.

Nevertheless, despite the lack of incentives to assess the posting conditions once the certificate is issued, the Polish institution still did so in this case. This is therefore a success story, in which compliance with EU law has triumphed over financial and administrative burdens for the issuing Member State.

Income to be taken into account for calculations in situations of overlap of benefits of different kinds: C-45/22 HK v Service fédéral des Pensions (SFP)

Case C-45/22 HK v Service fédéral des Pensions (SFP) is the first case where the Court had the opportunity to interpret Article 55(1)(a) of Regulation 883/2004 on the method of calculation regarding overlapping benefits of a different kind (paragraph 41 of the Opinion of Advocate General Rantos).

HK was in receipt of old-age pensions from Spain and Belgium, and following his spouse's death, he also received survivor’s pensions in Finland, Spain and Belgium. HK disputed the calculation of his survivor's pension (in Belgium) by the Belgian Federal Pensions Service (‘SFP’). The two parties, HK and the SFP, when applying the rule against overlap of benefits of a different kind (in this case, old-age and survivor's pensions) took differing levels of income as a basis for their calculations and thus arrived at different conclusions (paragraphs 19–27). Specifically, HK and the SFP disagreed as to the amount which was in excess of the ceiling imposed by the Belgian anti-overlap rule (based on Article 55(1)(a) of Regulation 883/2004), and therefore taken into account for the calculation of the survivor's pension. Strikingly, the difference between the amount calculated by the SFP (EUR 1929.03) and HK (EUR 6399.01) was substantial.

The question for a preliminary ruling concerned the interpretation of Article 55(1)(a) of Regulation 883/2004 (entitled ‘Overlapping of benefits of a different kind’), in order to know whether SFP or HK's method of calculation should be followed. In particular, it was unclear whether the phrase ‘shall divide the amounts of the benefit or benefits or other income, as they have been taken into account’ in Article 55(1)(a) was specific enough to allow (only) one of the two conflicting calculation methods proposed by the two parties.

The Court clarified that Article 55(1)(a) does not contain any express indication requiring Member States to take into account a specific amount (paragraphs 38–39). It is therefore up to the Member States to determine the proportion of income to be taken into account for the purpose of calculating the amount of benefits (paragraph 40).

Next to that literal interpretation, the Court considered the context and objectives of Article 55(1)(a) (paragraph 35). It found that Article 55(1) was intended to protect against particularly unfavourable rules for migrant workers (paragraphs 41–44). Agreeing with Advocate General Rantos, the Court confirmed that the method of calculation of the SFP was not ‘particularly unfavourable’ for migrant workers, although it resulted in a lower level of benefits compared to the approach advocated by HK (paragraph 45). The Court conceded that the method of calculation was not the most favourable possible (in terms of the level of the survivor's pension) but nevertheless HK was left in a better (financial) position (paragraphs 45–46). In other words, the method of calculation followed by the SFP was not ‘particularly unfavourable’ for the purposes of attaining the objective of free movement of workers, but also not the most advantageous method.

As such, this judgment follows previous judgments of the Court in which, depending on the case and the national rules applicable, the disparities in Member States’ legislation may result in more or less advantageous situations for migrant workers. ²⁴ In this case, Belgium followed a method of calculation that was neither the most advantageous nor a particularly unfavourable one for migrant workers. HK, however, had proposed a method of calculation, used by France for example, which is more advantageous (paragraphs 25–27). Still, both methods are permissible and Member States have a margin of discretion in choosing the way in which they take income into account for the purpose of calculating overlaps of benefits of different kinds. ²⁵ After all, the Court considered that this margin of discretion is in line with the coordination regime, since Regulation 883/2004 seeks to coordinate and not harmonise social security systems (paragraph 47).

It seems that in HK, the Court decided to balance rights linked to the free movement of workers with Member States’ discretion, which is logical given the wording of the provision and the context of coordination of social security systems. However, it is not a carte blanche to Member States, since they must ‘nonetheless comply with […] the provisions of Regulation 883/2004 relating to the rules against overlapping’ (paragraph 49). Therefore, any provision or practice which would be ‘particularly unfavourable’ for migrant workers would be deemed contrary to Article 55(1).

Dutch tax and pension rules on transfer of pension capital are incompatible with free movement of workers: Cases C-459/22 and C-360/22 European Commission v Kingdom of the Netherlands ²⁶

On 16 November 2023, the Court of Justice rendered two judgments in infringement proceedings referred by the Commission in 2020 concerning the incompatibility of Dutch rules on the transfer of pension capital with EU free movement law. ²⁷ With these judgments, the Court in fact settled a long dispute which began as early as 2012, ²⁸ with several exchanges in 2018 ²⁹ and in 2019 ³⁰ between the Commission and the Netherlands.

The measures contested by the Commission are pension and fiscal rules related to supplementary pension rights, also called ‘second pillar occupational pension rights’. These rules are relevant in cases of transfer of pension capital to a pension insurance institution established in another Member State. Although the two judgments were not joined cases, the measures at stake are linked. Case C-459/22 ³¹ deals with the requirement under Dutch law that an international pension capital transfer be tax-exempted only if a guarantee is offered either by the pension insurance institution to which the pension capital is transferred or by the employee transferring the capital. Case C-360/22 concerns the fact that the international pension capital transfer is tax-exempted only if it is transferred to a pension insurance institution located in a Member State in which the lump-sum payment option of the pension savings is not more generous than the conditions imposed in the Netherlands. ³²

In terms of context, this guarantee system should be seen in the context of the tax exemption system (the so-called ‘EET’ system, which facilitates pension saving). In that EET system, the payment of pension contributions is exempted from taxes (i.e. deductible), as are any interest from that saving and any yields on capital investments. The taxation happens at the moment when the pension is paid to the employee (i.e. deferred taxation). Hence, migrant workers are exempted from taxes when they save for their pension and, if they ask for the transfer of the pension value, there is a risk that they will not be taxed on the pension in the future. The question of which State may tax the pension benefit at the moment of payment of the saved pension is a question dealt with in bilateral tax treaties. In most cases (following Art. 18 of the OECD Model Tax Treaty rules), the person will be taxable in the State of residence. For the Netherlands, this means that it has facilitated pension savings through tax exemptions but then is not able to tax the final product, since that product is transferred to another State. There is therefore a loss of tax profit for the Netherlands. This is the main reason why the Netherlands is so reticent to allow the transfer of pension savings to another State without any guarantee or tax implications.

Although these are fiscal policy measures, which fall within the competences of the Member States, the Court recalled that Member States should still pay due regard to EU law (paragraph 28 of case C-45/22 and paragraph 25 of case C-360/22). Since the case is primarily about the situation of cross-border workers transferring their pension capital to other Member States, the Court examined these measures in connection with Article 45 TFEU (paragraphs 30–31 of case C-459/22 and paragraphs 27–28 of case C-360/22). ³³

Article 45 TFEU not only prohibits measures restricting or making it less attractive for workers to move between EU Member States, but it also prohibits discriminatory measures. While the Dutch rules on supplementary pensions apply indistinctly to insurance providers established in the Netherlands and in other Member States, the Court considered that those rules imply that insurance providers must have an extensive knowledge of the Dutch tax rules concerning pension rights. This necessity of extensive knowledge of Dutch tax rules on pension rights constitutes a disadvantage for insurance providers established in another Member State (paragraphs. 33–35 of C-459/22). Furthermore, the situation in which the employee is the one providing such a guarantee only occurs in cases of transfer of funds to a non-Dutch insurance provider and therefore results in differential treatment (paragraph 36 of C-459/22). Finally, the taxation of the transfer of capital only arises in cases of transfer of the capital to insurance providers in another Member State where the conditions for transfer are less strict than in the Netherlands. This renders the exercise of free movement of workers less attractive (paragraphs 30–34 of C-360/22). While exercising free movement may have a negative impact with regard to the social security situation of the person concerned, due to the disparities between national systems, the Court highlighted that here the negative impact does not come from the exercise of the free movement rights but rather from Dutch law (paragraphs 37–38 of C-360/22).

On the possible grounds for justifying this restriction to the free movement of workers, the Netherlands said, in its defence, that the objective of the measure was to secure pension entitlements for life, connected to the social protection of workers. According to the Dutch government, that measure is necessary in light of the risk of migrant workers moving and transferring the value of their pension to another State, including a third country, where they might receive their pension at once, spend it all and then return to the EU, or to the Netherlands (paragraphs 42–43 of C-459/22). Even though the social protection of workers is an overriding reason of general interest capable of justifying a restriction to the free movement of workers (paragraph 47 of C-459/22 and paragraph 49 of C-360/22), the Court ruled that the measures failed to guarantee that the worker will benefit from a pension for life and went beyond what was necessary (paragraph 50 of C-459/22 and paragraphs 51–52 of C-360/22). Also, the scenario described by the Netherlands, whereby a person spent all his or her pension fund, was not only in fact the responsibility of the State of residence, but also an exceptional scenario which cannot in itself justify the general rule in place in the Netherlands concerning the transfer of pension capital (paragraphs 51 and 52 of C-459/22).

The rulings of the Court in these two judgments are not surprising in themselves. They follow on from previous case law, such as C-522/04 European Commission v Kingdom of Belgium, ³⁴ in which tax rules providing for less favourable treatment of occupational pension schemes transferred to pension insurance providers established abroad were already considered as a restriction to free movement law. Although these two judgments are about Dutch rules, they will have a considerable impact in the field of occupational pensions for the whole of the EU, given the importance of the Dutch insurance providers in pension saving funds. The Dutch rules on transfer of pension savings will have to undergo serious revisions following these judgments. Most likely, after these two judgments, transfers of pension savings from the Netherlands to other EU Member States will increase.

Other interesting cases

Apart from the four judgments discussed, we would like to report briefly on additional judgments. On 14 December 2023, the Court rendered a judgment in case C-206/22 TF v Sparkasse Südpfalz, ³⁵ on whether paid annual leave should be carried over in cases where it coincided with quarantine measures in the context of the Covid-19 pandemic. In line with the judgment C-411/22 ThermalHotel, ³⁶ discussed in the previous case report, ³⁷ the Court concluded that quarantine is not comparable to illness. As a result, the rules on paid annual leave in cases of illness do not apply. A week earlier, the Court, in its Grand Chamber composition, had rendered another judgment related to the pandemic in the case C-128/22 Nordic Info. ³⁸ That case concerned restrictions on free movement due to testing requirements and quarantine obligations. In that judgment, the Court found that Member States may impose restrictions on movement of EU citizens on the grounds of public health. Member States must however ensure that the restrictions are clear and precise so that they are foreseeable by the citizens. Furthermore, procedural guarantees must be ensured, allowing for appeals against and time limits on these restrictions. Finally, when adopting those restrictions, Member States need to fully respect the proportionality principle.

Finally, two judgments have been rendered on social security benefits for EU officials. The social security situation of a former EU official who is now a pensioner in Belgium but works as a self-employed consultant was under scrutiny in case C-415/22 JD v Acerta. ³⁹ The Court interpreted Article 14 of Protocol No 7 on privileges and immunities of the European Union as well as Article 72 of the Staff Regulations as precluding compulsory affiliation to the social security scheme of the State where the person conducts a self-employed activity when that person has remained in the service of an EU institution until pensionable age. The second judgment concerned with social security benefits of EU officials is an appeal case from the General Court: C-173/22 P MG v EIB. ⁴⁰ This case involved an appeal against the interpretation given by the European Investment Bank (EIB) of the EIB Staff Regulation concerning child allowances. The EIB considered that a child allowance for a dependent child can only be granted to a parent who has the sole custody of the child. Following divorce, MG was no longer receiving the child allowance due to the lack of sole custody of the child. The Court found that the EIB infringed the right to be heard enshrined in Article 41 of the Charter, as well as violating the principles of equal treatment and proportionality.